Trading sentiment turned slightly positive early Monday, following Friday’s risk-off mood, as U.S. President Donald Trump softened his stance on new China tariffs. This shift, along with public holidays in the U.S., Japan, and Canada and stronger-than-expected trade data from China, helped markets pare earlier losses.
On Friday, the major shock came from President Trump’s announcement of a 100% tariff on all Chinese imports, starting on November 01. He said it was in response to what he called “an extremely hostile letter to the World” from China, outlining large-scale export controls on nearly all of its products — and even some not made by China. The statement triggered a sharp sell-off in global markets, particularly affecting crypto assets.
Separately, White House Office of Management and Budget (OMB) Director Russell Vought posted on X that “The RIFs have begun,” referring to “reductions in force.” The OMB confirmed to the BBC that substantial staff cuts had started. By late Friday, seven federal agencies had begun laying off over 4,000 workers. The BBC also noted that President Trump has consistently used shutdowns to advance his goal of reducing the size of the federal workforce.
Friday’s mixed U.S. data and Trump’s tariff threat weighed on the U.S. Dollar before a corrective rebound early Monday.
The preliminary October reading of the University of Michigan (UoM) Consumer Sentiment Index came in at 55.0, slightly lower than the previous 55.1 but above the expected 54.2. The UoM Consumer Expectations Index declined to 51.2 from 51.7. The University of Michigan’s one-year Consumer Inflation Expectations eased to 4.6% from 4.7%, while the five-year outlook remained unchanged at 3.7%.
Over the weekend, attention turned to Trump’s change in tone after firm statements from the Chinese government, particularly regarding rare earth export controls. Analysts believe both Washington and Beijing may be positioning ahead of a potential meeting between President Trump and President Xi Jinping later this year.
On Sunday, President Trump attempted to ease trade war concerns, hours after his tariff threat. The proposed 100% duties would mark a sharp rise from the current average U.S. tariff rate of 55%. Posting on Truth Social, he said China’s economy “will be fine” and emphasized that the United States wants to “help China, not hurt it.” He also said President Xi Jinping had “a bad moment” and that both sides want to avoid economic pain.
Beijing warned Washington against using threats and promised “corresponding measures” if the United States proceeds with the tariffs. The Ministry of Commerce of the People’s Republic of China said it does not seek a tariff war but is “not afraid of one,” and called for dialogue. This exchange followed China’s announcement of new export restrictions on rare earth minerals, which are critical for advanced manufacturing and military technology. China currently accounts for around 70% of global rare earth mining and nearly 90% of processing capacity.
United States Vice President JD Vance defended President Trump’s approach, calling China’s supply chain dominance “a national emergency.” Speaking on Fox News, he warned that any aggressive response from China would be met with stronger U.S. action, stating, “The President has far more cards than China.”
The escalating rhetoric has added uncertainty around a possible Trump–Xi meeting in the months ahead.
On Monday, China’s trade data for September showed resilience. Exports rose 8.3% year-over-year — the fastest pace in six months and well above expectations. Imports also came in stronger than forecast.
In France, a new government has been formed. French President Emmanuel Macron reappointed Roland Lescure as Finance Minister. Prime Minister Sébastien Lecornu said the government must resolve the ongoing political crisis, restore public finances, and aims to pass a national budget before year-end. He added that issues raised during recent consultations will be debated in parliament. These developments are marginally positive for the euro, though markets had already priced them in due to prior leaks.
In Japan, the Komeito political party said it does not rule out cooperation with opposition parties.
In the United Kingdom, Chief Financial Officers (CFOs) reported the highest level of concern in over a decade about competitiveness and productivity. Another tax hike is expected in Chancellor of the Exchequer Rachel Reeves’s November budget.
In New Zealand, permanent migration fell sharply in August. Meanwhile, the BusinessNZ–BNZ Services Purchasing Managers’ Index (PMI) for September rose slightly to 48.3 from the previous 47.6.
Against this backdrop, the U.S. Dollar Index (DXY) edges higher after a downbeat week. The USDJPY pares its biggest daily slump in 10 weeks, while gold extends Friday’s gains toward an all-time high (ATH). Meanwhile, EURUSD, GBPUSD, AUDUSD, and NZDUSD also recover. USDCAD drops for a second straight day. The price of oil bounces off a five-month low hit on Friday, while cryptocurrencies retreat after a sharp rebound on Sunday, following heavy losses on Friday and Saturday.
EURUSD and GBPUSD both maintain Friday’s recovery from multi-day lows, though they lack strong upward momentum. The U.S. Dollar remains weak due to holidays in the U.S. and Canada, as well as China-linked optimism and a softer tone in President Trump’s trade war rhetoric with China.
Friday’s risk aversion and a weaker USD caused the USDJPY to experience its biggest daily drop since early August, with the JPY benefiting from its haven status and hopes that Japan’s political turmoil could ease soon. Recent talks of potential cooperation with opposition parties added to optimism. However, holidays in the U.S. and Japan have limited the Yen’s movement recently.
AUDUSD and NZDUSD fell on Friday, impacted by Trump’s China tariffs due to their strong ties with China. USDCAD, however, retreated after better-than-expected Canadian employment data eased concerns. Despite this, the Canadian Dollar (CAD) ignored the drop in crude oil prices, Canada’s key exports, as geopolitical fears eased and Trump’s tariff threats appeared to reduce China’s energy demand.
However, by early Monday, AUD, NZD, and CAD had gained, driven by positive Chinese export data, the absence of U.S. traders, and Trump’s slightly softer tone on the trade war.
The market’s uncertainty and the U.S. Dollar’s weak movements allowed Gold to reach fresh all-time highs near $4,072, continuing its eight-week uptrend. Lower rate expectations from major central banks, strong gold demand from China, and India’s festive season all support this rise in gold buying.
Meanwhile, Crude Oil rebounded from its lowest level since May, as traders trimmed previous losses amid easing concerns about China’s demand, following upbeat export data and President Trump’s softer stance on tariffs. It’s important to note that the Hamas-Israel ceasefire and positive inventory data previously weighed on oil prices during the risk-off mood.
With holidays in Japan, the U.S., and Canada, and a light economic calendar elsewhere, Monday looks slightly dull. However, risk catalysts, including Trump’s softer stance on China and mixed geopolitical news, could keep markets engaged.
Risk aversion may support the U.S. Dollar and Gold, while cryptocurrencies and equities might see further losses. USDJPY could retreat, benefiting from the JPY’s haven status, though the drop may not be as sharp as Friday’s. Other major currencies and antipodeans could trade sideways, while Crude Oil might pare its earlier losses.
May the trading luck be with you!
